Macro economics

 

Q1. a. Using the quantity equation, derive the negative relationship between real GDP (Y) and the Price Level (P).
b. This negative relationship underlies the aggregate demand (AD) curve. List two factors that shift this curve. Explain how each factor shifts the AD curve.
Q2. a. Explain why the Classical model is characterized by a vertical aggregate supply (AS) curve. Be sure to explain the important assumption that underlies this vertical relationship.
b. Given this vertical AS curve, explain how the AD-AS framework can be used to depict the quantity theory of money.
c. What policy conclusions follow from the Classical model as far as the need for aggregate demand management is concerned?
Q3. a. Why is the Keynesian model characterized by a horizontal or upward sloping AS curve? Explain.
b. What is the significance of the upward sloping or horizontal AS curve for the Keynesian model? Explain using a leftward shift of the AD curve.
c. What policy conclusions follow from the Keynesian model as far as the need for aggregate demand management is concerned?
Q4. a.Provide a brief explanation of the Phillips curve.
b. Define the term stagflation. Why does the emergence of stagflation undermine the Phillips curve?
c. Using the AD-AS framework, provide a description of Friedman’s explanation of stagflation.
d. How did Friedman’s explanation of stagflation undermine the Keynesian model?

 

Sample Solution

library, he meets a man named owl eyes, who explains in an energetic tone that all of the book are “real”(45).Owl eyes recognizes Gatsby’s commitment to the American Dream and his dream to win Daisy. Gatsby has left no detail out, in order to impress Daisy that he is never going back and is all in. Fitzgerald alludes to David Belasco, who was a famous play write, director, and producer who spared no expense in creating elaborate stage sets. As a way Gatsby is shown as Belasco, because Gatsby did not care how much money he wasted on books since his only focus was Daisy’s opinion. Overall, through the library Gatsby demonstrates that his only attention is focused on her.

6. Meyer Wolfsheim is introduce as Gatsby’s business partner. He is described as “A small, flat nosed Jew… I discovered his tiny eyes in the half darkness”(69).Wolfsheim is shown to shade himself from other people’s sights as his personality fits perfectly. In addition, Wolfsheim describes about how him and Gatsby are about “human morals”(72). Through Wolfsheim Gatsby is shown to be connected with shady dealings, in this case having drug stores planted around empty streets. It reveals how they are both mobsters who have gained their earnings through dirty money. Overall Gatsby does not want Daisy to ever find out how he gained his fortune and is a man of innocence.

7. Gatsby met Daisy on 1917 when he was stationed at Louisville Kentucky. Ever since thei first encounter Daisy was fascinated by Gatsby; in such case the day before her wedding with Tom, “she began to cry-she cried and cried”(76). Daisy Reveals how she was unsure of marrying Tom, but was trapped in doing so. But in reality Tom only wanted Daisy for financial security since she was born out of old money with enlisted that she would always be wealthy. Through this, the reader learns that Daisy always had Gatsby in her mind and never forgot about him, ensuring that she did not like Tom at first.

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